Monday, January 17, 2011

THE BREAKING POINT: $120 Oil

Not me, the world economy.
From Pragmatic Capitalism:

According to Merrill Lynch’s Sabine Schels, a commodity analyst, the breaking point for the global economy is when the size of the energy sector hits 9%. With the sector currently at 7.8% Schels says the breaking point is $120 oil:

“Whenever the size of the energy sector in the global economy reached 9 percent, we went into a major crisis,” said Sabine Schels, a commodity analyst at Merrill Lynch.”It was in the 1980s and it was the same in 2008. Right now we are at about 7.8 percent and if you go above $100 per barrel to $120 per barrel, you get to that 9 percent level.”

With oil trading at roughly $92 today this leaves us with a 30% cushion according to this analysis, however, strains will increase if prices should continue to gravitate towards that level....MORE